Drop in profit warning numbers in the north west

A recent report by accountancy firm Ernst & Young has revealed that only two profit warnings had been issued to quoted companies in the region during the second quarter of 2010. This was the lowest number to be posted in eight years.

Tom Jack, of Ernst & Young, has explained that greater public spending and the money forward by the government to stimulate the economy had helped many of the companies in the north west to ride the worst of the recession.

He said:

“Many companies are now enjoying a trading uplift, which explains the exceptionally low levels of warnings in some sectors.

“However, given the potential challenges to growth in the year ahead, companies will need to manage costs and expectations carefully to mitigate a potential stall or stutter in 2011, when government spending really starts to retrench.

“Uncertainty and demand volatility is usually associated with a rise in profit warnings and we continue to expect the number of warnings to increase in the year ahead.”

Despite this good news for business in the region, Mr Jack did offer a warning regarding the access to credit, which is expected to remain limited, and the ability to invest through the year. This may lead to an increase in the number of profit warnings later in 2010.